Dreyfus Anticipates Brazil’s Increased Shift to Ethanol, Cautions on Sugar Shortage – Reuters

By Marcelo Teixeira

NEW YORK – Global commodities trader Louis Dreyfus announced on Wednesday that Brazilian mills are expected to shift a greater amount of sugarcane to ethanol production than previously anticipated, driven by high energy prices, which will likely lead to a decrease in global sugar supplies.

Enrico Biancheri, Dreyfus’s sugar director, stated at the Citi ISO Datagro sugar conference in New York that the mills in Brazil’s center-south region are projected to produce only 29 million tonnes of sugar for the new season starting in April. This prediction sits at the low end of analysts’ expectations.

Biancheri remarked, "At current prices, the world is heading towards a sugar shortage due to the ethanol-oriented crop in Brazil," indicating that an increase in sugar production will necessitate higher sugar prices to surpass those of ethanol.

Brazilian mills have the flexibility to allocate their cane to either sugar or ethanol based on market prices. Given the rising energy costs, a shift of some cane to ethanol was anticipated, but Dreyfus believes this change will be more significant than expected.

In contrast, U.S. broker and analyst StoneX estimated on Tuesday that Brazilian center-south mills would produce 33.9 million tonnes of sugar, nearly 4 million tonnes more than Dreyfus’s forecast.

Biancheri also noted that the financial return from ethanol sales currently equates to a sugar price of 20.18 cents per pound, while sugar was trading at 18.54 cents per pound on Wednesday.